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American Economic Journal: Applied Economics: Vol. 4 No. 1 (January 2012)

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Investing Cash Transfers to Raise Long-Term Living Standards

Article Citation

Gertler, Paul J., Sebastian W. Martinez, and Marta Rubio-Codina. 2012. "Investing Cash Transfers to Raise Long-Term Living Standards." American Economic Journal: Applied Economics, 4(1): 164-92.

DOI: 10.1257/app.4.1.164

Abstract

Using data from a randomized experiment, we find that poor rural Mexican households invested part of their cash transfers from the Oportunidades program in productive assets, increasing agricultural income by almost 10 percent after 18 months of benefits. We estimate that for each peso transferred, households consume 74 cents and invest the rest, permanently increasing long-term consumption by about 1.6 cents. Results suggest that cash transfers can achieve long-term increases in consumption through investment in productive activities, thereby permitting beneficiary households to attain higher living standards that are sustained even after transitioning off the program. (JEL D14, H23, I38, O12)

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Authors

Gertler, Paul J. (U CA, Berkeley)
Martinez, Sebastian W. (Inter-American Bank, Washington, DC)
Rubio-Codina, Marta (Institute for Fiscal Studies, London)

JEL Classifications

D14: Personal Finance
H23: Taxation and Subsidies: Externalities; Redistributive Effects; Environmental Taxes and Subsidies
I38: Welfare and Poverty: Government Programs; Provision and Effects of Welfare Programs
O12: Microeconomic Analyses of Economic Development

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